The Other Mr. Perkins

James Creelman in Pearson’s Magazine August 1 1907

The Other Mr. Perkins

James Creelman in Pearson’s Magazine August 1 1907

The Other Mr. Perkins


James Creelman in Pearson’s Magazine

THIS is a story without a tree or a green field or a bit of blue sky in it, the tale of a man and an idea worked out in the fever-heats of a sordid city and through great smoking towns of furnaces, roaring machinery and men stripped for rough toil.

The man is George Walbridge Perkins, the brilliant and much-reviled young partner of John Pierpont Morgan, “dean of American finance,” and the idea is the United States Steel Corporation’s method of dividing profits with its more than two hundred thousand employes—a shadow of the economic bridge over which, it is said, humanity is about to pass from the age of competition to the age of co-operation.

It is not the horned and hoofed Mr. Perkins, haled into court by the newspapers in a glow of mephitic red fire, but another Mr. Perkins, a tremendous worker with a genius for organization, a man of practical imagination, who, looking at things from the very centre of financial and industrial power, sees a peaceful partnership between the stock owners of great corporations and their employes, as the outcome of the present worldwide movement toward the elimination of waste by concentration in business.

The one Mr. Perkins is the creature of over-heated journalism and vituperative politics. The other Mr. Perkins is a citizen whose zeal and intelligent industry along large lines of constructive business have won for him, at the age of forty-five years, a recognition so general that the grand jury which indicted him for a purely technical offence, in his effort to save the policy-holders of the New York Life Insurance Company from a great financial loss, was compelled to explain that he had no selfish or corrupt motive in what he did.

“The profit-sharing plan of the United States Steel Corporation,”

said Hr. Perkins, “is an attempt to induce a vast army of men of various talents and temperaments, scattered all over the country, to work heartily together by making them partners of the stockholders who own the means of production. An experience of nearly five years in the largest private business organization the world has ever seen shows that this form of partnership between labor and capital is a moral as well as material success. It goes well with the idea of complete publicity which is one of the main policies of the Steel Corporation. These two ideas have practically converted this organization into a semi-public enterprise.

“As I said of a somewhat similar scheme in the relations of the New York Life Insurance Company to its agents, this is socialism in the highest, best, most ideal sense, a socialism that makes partners of employer and employe, yet preserves the right of private property; retaining the capitalist’s incentive to enterprise, while giving the workers a new inspiration for effort; humanizing the contact of a mighty organization with its thinkers and doers; promoting good will and industrial peace.”

Mr. Perkins’s brown eyes burned with enthusiasm and he gripped the arms of his chair tightly as he spoke of the great design.

“It was this thought that brought the profit-sharing plan into operation in the Steel Corporation,” he continued. “It was believed that in this way ugly competition would be eliminated and co-operation substituted, which, under the corporation’s offers, would produce just as keen a personal incentive to success as the old stimulation of competition had inspired.

“Competition, after all, means, as a rule, one man’s success and another man’s failure. It means that, in the end, one man will be on top and the

other man underneath. But co-operation means the success of all.

“Many have thought that competition was necessary to bring out the best there was in man, that the incentives necessary to us all were to be found only in competition. But the success of these profit-sharing plans of the Steel Corporation, worked out in the greatest sphere of practical action known to private enterprise, has proven that something can be substituted for competition, and that something is co-operation, which brings far greater success and, best of all, success to everybody.”

It was no irresponsible dreamer who spoke, no pale idealist mooning helplessly among the stubborn realities of a civilization absorbed in construction and money-making, but a hard-headed, experienced financier and organizer, the trusted partner of the greatest financial organizer and leader of the age, the very man who, as chairman of the finance committees of both the Steel Corporation and the New York Life Insurance Company, proposed and applied the principle of profit-sharing.

The place in which Mr. Perkins sat as he spoke was the centre of the financial nerve-plexus of the Western Hemisphere, the white marble corner of Wall and Broad Streets, where for a generation Mr. Morgan—man of unbroken word— has advised the agents of kings, governments, churches and banks how to invest their moneys, arranged international loans, combined and adjusted interests involving billions of dollars, presided over conclaves of money monarchs and piled up fortune on fortune for others as for himself by acting on the theory » that the future of America would be greater than its past.

Here was organized the United States Steel Corporation, .which employs more than two hundred thousand men, pays out about a hundred and forty-seven million dollars a year in salaries and wages, and does an annual business of more than six hundred and ninety-six million dollars, with bonds and stocks aggre-

gating fourteen hundred and thirtytwo million dollars.

Not a dim and curtained chamber of gorgeousness, this throne-room of American finance, but a long, highceilinged room, with five or six big desks; a plain place without a note of pomp or ornament, a row of large windows on one side and on the other side an immense glass partition through which the clerks and visitors may see Mr. Morgan and his partners at work.

Mr. Perkins’s place is close beside the desk where his partner, Mr. Morgan, commonly sits witha big black cigar in his mouth, the master of the scene.

At a first glance Mr. Perkins gives one an impression of almost jaunty youth, light, alert, nimble. Then you notice the deep furrow in his forehead, the fine wrinkles about his eyes, the firm set of his mouth and an almost pathetic air of nervous tensity. It is not so long since his gay, boyish manner and light-hearted smile gave him a look of immaturity that made his prominence in the gray-haired world of finance a matter for wonder. The persistent attacks of newspapers and politicians have changed all that.

The straight wide forehead that thrusts out above Mr. Perkins’s large brown eyes is full to the temples and very high. It is the forehead of a man who can gather facts and make use of them with great rapidity. The power to observe details and the ability to reason them out to a conclusion are developed and balanced to an extraordinary in that steep brow.

You mark the wide, well-curved jaws, the strong, round chin; the small, fine ears ; the short, straight nose, wide at the nostrils ; the smooth, round cheeks ; the crisp brown hair, of almost feminine delicacy ; the suggestion of imagination in the great wide-set eyes—but vour glance always returns to that tremendous compact and aggressive forehead, the portent of energy, ambition and intelligence.

It is interesting to study such a head and countenance, for Mr. Per-

kins has risen by a genius, peculiarly American to a business position never before commanded by a man of his age, and, whatever criticism may be made of mistakes due largely to zeal and an impatience of roundabout methods, he has, in spite of cruel misrepresentations, been a pioneer in the effort to humanize and harmonize the relations of the three giant corporations whose financial policies he has executed to their employes, and has been a constructive force.

The great profit-sharing plan by which millions of dollars have already been distributed among the officers, managers and workingmen of the Steel Corporation is no more remarkable and was, perhaps, easier of contrivance, than the “Nylic” fund, so greatly attacked in the insurance investigation, which Mr. Perkins created in the New York Life Insurance Company—both schemes being conceived for the purpose of changing the material contact and moral attitude of employer and employe by substituting co-operation for competition, partnership for the raw wage system.

There is something fascinating in the story of this wonderful American boy, who, in twenty-two years, rose from the work of an office boy at less than six dollars a week to a salary of $75,000 a year, who was sought out to be the partner of the foremost American financier, and of whom Andrew Carnegie said, “This young man actually sweetened sordid business dealings by the amiability of his manners.”

Mr. Perkins was born in Chicago forty-five years ago. He is of English stock. His father was an able agent of the New York Life Insurance Company, a solid, chunky man, born in New York State, who went to Chicago and distinguished himself for his philanthropic work. The elder Perkins opened soup-houses for the poor and organized mission Sunday schools. He founded a railroad man’s Sunday school in a box car and it afterward became the biggest thing of its kind in all the west. He worked side by side with Dwight L.

Moody, the evangelist. He organized the Young Men’s Christian Association in Buffalo, and in later years his son erected a building in memory of that fact.

The youth, whose powers were yet to astonish the hardest heads in Wall Street, got his education in the Chicago public schools. At the age of seventeen years his father procured him a position as office boy in the Chicago establishment of the New York Life Insurance Company. Presently he went to Cleveland as clerk to his father, who became assistant superintendent of agencies in Ohio. He was advanced to the position of cashier.

His father died in 1886, leaving a widow, two sons and a daughter.

George W. Perkins was then twenty-four years old, a pink-faced stripling who looked younger than his age. He has since confessed that when he came home from his father’s funeral he stood at the gate and, looking at the house in which his mother and sister and younger brother lived, he said to himself, “That’s up to me. It’s my problem.”

He had been an indifferent student at school, but when there was a baseball team to be organized or any practical work that called for organization and energy he was always the leader, the planner, the doer.

Suddenly bereft of his father and business chief, the young cashier threw himself into his father’s work. No one was appointed in his father’s place. He was simply the cashier of the office and had no authority beyond his work ; yet it is a sign of his surprising enterprise that he cleared up his father’s unfinished business, reported the situation to President Beers in New York, his salary was increased to $1,200 a year, and, without further instruction, or suggestion of promotion, he promptly hired an assistant to aid him in getting new business for the company.

His industry and persistence were astonishing. The agents of the company followed his leadership enthusiastically, asking no questions as to his right to lead. He dashed about

here and there, in Cleveland and out among the country districts, expounding life insurance and winning success, by sheer persuasion.

One night he went to a country flour mill. It was snowing hard. The miller and his brother and son would not venture out in the storm. They could not escape from the young agent with the snapping brown eyes and hypnotizing smile. By offering to take their notes in payment for premiums he managed to insure all three. Then he rubbed his hands and recalled the fact that earlier in the evening he had noticed his victims putting away money in the safe. He understood human nature. In a few minutes’ talk he persuaded the men that they could make money by discounting their own notes on the spot, and closed the transaction by pocketing their money.

As Mr. Perkins started for the door he was called back.

“Young man,” said the miller, “do you understand what a stroke of business you have done here tonight ?”

“I think so,” said the young agent modestly.

“Well, by God, I’d like to see you when you are forty !”

At the end of a year Mr. Perkins had outstripped his father’s business record with the company. Mr. Vanuxem was appointed general agent for Ohio, and he offered to employ Mr. Perkins at a salary of $7,500 a year. But the youth was too shrewd to allow another man to get credit with the company for his work, and he put away the tempting bribe to accept the agency in Indiana at $3,600 a year. That was the turning point in his business life. He avoided the error which young men too often commit, and sacrificed the present for the sake of the future.

Before attempting his work in Indiana he went to the west to settle his father’s private affairs. He found a great life insurance field neglected, and in Kansas City, Wichita and other places, he began to write policies. He went to Denver, and continued to write policies. He hired agents to

assist him. He paid no attention to the repeated calls for his presence in Indiana, but went right along building up new buisness. At the end of the year the company owed him $15,000. He was then not quite twentysix years old.

Then President Beers, overcome by what the young agent had accomplished on his own initiative in a little more than two years, made him inspector of agencies for the west at a salary of $15,000 a year, with a contract for five years. He roamed about for a year, and then he settled down at Chicago in full charge of everything west of that city, north or south.

He overthrew the general agents, who had been like petty princes, ruling jealously in their several territories and refusing to allow interference. In their places he established branch offices controlled by the company.

Business increased by leaps and bounds under the new system. The army of the company’s agents in the west grew rapidly, and Mr. Perkins was its inspiration. He issued a weekly publication for the benefit of the agents, and by stimulating a spirit of rivalry and working up a sort of hurrahing enthusiasm he made the west one of the most profitable fields of the company.

Those who saw him in those days say that he seemed never to rest, that nothing could daunt him, that business was like a religion to him, that he had the spirit of a fanatic.

Then came a crisis. The Beers administration was attacked and overthrown. Mr. Perkins came to New York and fought for President Beers like a wildcat. Even when the whitehaired president was overthrown Mr. Perkins remained his friend and went to his deathbed to comfort him, even as he was,afterward to stand by the deathbed of President McCall, the broken-hearted. .

When Mr. McCall became president of the New York Life Insurance Company, Mr. Perkins was made third vice-president with full power for a year over all the agencies, with a salary of $20,000 a year, which later

on was increased to $25,000. He was now twenty-nine years old.

During the great insurance investigation Mr. Perkins, who was a witness, insisted on standing up while testifying, He was asked to sit down. “I can’t sit down,” he said. “Well, try,” urged the inquisitor. “I can’t do it; I work on my feet,” was the answer.

So it was in the tremendous campaign which he urged among the agents of the New York Life Insurance Company. He abolished the general agents in every direction and substituted branch offices, and soon he piled up such a volume of new business as to stir rival companies to jealous anger.

Mr. Perkins does not drink intoxicants or smoke. He does not believe in working on stimulants. As a life insurance agent he refused to use wine in his business, believing that a man who made a contract in cold blood would probably stick to it, while the man who was persuaded under the influence of wine was likely to relapse when his enthusiasm cooled off.

When he proposed to omit wine from one of the great agency banquets in New York he was laughed at. But he persisted in his plan and the feast was a great success. Thereafter wine was left out of similar functions, and theformer habit of turning business into a series of convivial orgies became unpopular with the agents.

The story of his successful fight to have the New York Life Insurance Company permitted to do business in Germany, Switzerland and Austria reads like a romance. The company had used every conceivable means of winning over the German Government. It had sent an old schoolmate of the Emperor to Berlin. It had used ambassadors. It had spent freely.

Then Mr. Perkins went to Berlin armed with introductions to the principal ministers. But he ignored the imperial greatnesses, threw away his letters and went straight at the fierceeyed, hairy bureau chief whose report had caused the company to be shut out of Germany and who had persistently

declared that it could only be readmitted over his dead body. And, incredible as it may seem, in a few months he had converted his raging foe, and it was this very man who, in a transport of enthusiasm, announced that the rights of the company had been restored in Germany.

“No man in the world but Perkins would have done it in that way,” said an admiring rival.

But the triumph of his life insurance career was the creation of the “Nylic” system, a profit-sharing plan which so stimulated the work of the agents, while cutting down expenses, that in eight or nine years the volume of the company’s business rose from $125,000,000 a year to $347,000,000.

The Nylic idea—so-called by combining the initial letters of the company’s name—began with an attempt to add honors and degrees to mere wages as an incentive to long service. Buttons and badges, with ultimate pensions, were introduced. Everything was based on length of service and the amount of business done.

This caught the imagination and human nature of the agents and a new esprit de corps was developed. The agents ceased to drift from company to company.

One of the most vital reforms aimed at was the eradication of misrepresentation by agents, who were tempted to lie for the sake of the enormous profits and prestige of new policies. The necessity of continuous service as a part of the profit-sharing plan made an agent think more of his future, and persuaded him to be conscientious in his dealings with the public. Soon the volume of complaints of agents’ tricks lessened, and presently such accusations became rare. The co-operative feeling did it.

This great co-operative plan, which piled up a fund of more than $1,100,000, preserved the working organization of the company against the bribes of its rivals and made the agency directors and their subordinates feel that they were, in a sense, partners of the company, was wholly the creation of Mr. Perkins. And all before he was thirty-six years old.

Mr. Perkins was afraid of Wall Street. But he became a director in the City National Bank. Then Governor Roosevelt made him president of a commission to save the noble Palisades of the Hudson River from destruction by greedy quarrymen, and he went to see J. Pierpont Morgan to raise money for that purpose. The commission hoped to get $125,000 by private subscription. The legislature would be asked to give the rest.

“Pll give $25,000,” said Mr. Morgan, promptly.

Mr. Perkins expressed his gratitude.

“Pll give the whole $125,000 if you’ll do something for me,” he added, with a significant look.

“What can I do for you, Mr. Morgan ?”

“You can take that desk over there and go to work,” pointing to the very desk at which Mr. Perkins now sits. “I’ve had my eye on you for a long time and I want you to come with me.”

It was then that the New York Life Insurance Company raised M.r. Perkins’s salary to $75,000 a year and he declined Mr. Morgan’s proposal.

Mr. Perkins struggled for months against the temptation to accept Mr. Morgan’s renewed offer.

“If it is a matter of money, name your own income and terms,” said Mr. Morgan in the large way that has won over so many men.

“It is not money that is worrying me,” said Mr. Perkins. “It is a question of my duty.”

Mr. Perkins went to Washington and laid the matter before President McKinley, who was his close friend.

“Don’t go to Wall Street, Mr. Perkins,” said the President. “Don’t let them break your heart down there.”

He was only thirty-nine years old and to be Mr. Morgan’s partner meant much. Mr. McKinley read the tempest in his eyes.

“Stay where you are,” he urged. “They will take the humanity out of you in Wall Street. Be careful or they will break your heart.”

Mr. Morgan’s offer was declined, but the master of American finance

was not to be put off and he continually renewed his invitation.

Then the New York Life Insurance Company, whose officers saw an advantage in having a partner of Mr. Morgan at the head of its finance committee, agreed to divide his services with the banking firm. Thereupon Mr. Perkins insisted on reducing his salary as vice-president of the company from $75,000 to $25,000.

But it is a well-known fact that Mr. Morgan himself was bitterly opposed to the continued service of his new partner in the affairs of the New York Life Insurance Company. Mr. Perkins felt, however, that the moneys of the company were accumulating so stupendously that the company needed to be in touch with some world-wide financial experience.

During the great life insurance investigation he was severely criticized for being at the same time an officer of the company and a member of a firm that sold to and bought from it, but it was shown that Mr. Perkins had always refused to touch any profit made on business with his company. He has freely admitted the justice of this criticism, and his friends say that he foresaw it from the first, but he insists that the double connection turned out to be a good thing for the policy-holders.

After serving as chairman of the New York Life Insurance Company’s finance committee for five years, Mr. Perkins retired. In that time his committee had offered to it securities amounting to $1,565,947,671, examined them all and bought, in five hundred and fifty transactions, $284,505,584 of bonds. By shrewd buying and selling the committee made a total profit for the policy-holders in five years of $10,019,996. And these facts were placed on the record on the day Mr. Perkins resigned.

One of the most dramatic incidents of the insurance investigation which damned so many names and blighted so many careers occurred when Mr. Perkins, white-faced and roused to a pitch of great emotion, insisted on reading a letter in which his father once bade him always to tell the truth,

and declared that to be the charter of his life. The newspapers worked upon the subject cynically and stirred up a national guffaw of laughter. Yet there was no more candid witness in that mocking scene.

But we have wandered away from Mr. Perkins sitting before his desk at the corner of Wall and Broad Streets, his countenance shining with enthusiasm over the progress of the Steel Corporation's profit-sharing plan. ,

That mightiest business enterprise ever contrived by the human brain was a sort of monster at first. The immensity of its proportions, the wide range of its operations, the scale of its finances and the diversity of its properties and markets, dwarfed individuals. There were moments when all save Mr. Morgan were dismayed when they surveyed the gigantic creature he had brought into being.

How to humanize the Steel Corporation ; how to give the monster a heart as well as a brain, to take the place of the many hearts and brains of the proprietors it had succeeded ; how to make the members of the tremendous army of labor, the officers as well as the rank and file, feel the impulse of co-operation ! The moral problem of the age of concentration had arrived.

It was not only that the earnings of the largest corporation in the world and the leadership of America in the steel industry, were involved, but the peace and happiness of great multitudes of men serving in the smoke and glare and noise of mills and foundries must be considered.

The formation of the Steel Corporation marked the supreme point of corporate combination, the very frontier of concentration in business. Its success or failure would profoundly influence the future course of corporation organization.

Had the limit of size been reached? Was it possible to animate business concentrated on such a scale, with the spirit that made its original owners successful ? Could men on salaries or wages carry on the basic industry of civilization, directed by other men on

salaries, with no proprietor above them but the public?

Mr. Perkins had come from the life insurance world, where business was based on domestic sentiment and where self-sacrifice was preached. The whole structure of life insurance was based upon mutuality of interest. As chairman ofthe Steel Corporation finance committee, with the approval of his associates, he worked out a plan on the principle of co-operation, which he says must ultimately supplant the principle of competition in business.

“Great as the value of the Steel Corporation’s plants were, the organization was equally valuable,” said Mr. Perkins. “We all recognized the importance of men as compared with machinery. An organized force working together continuously is as vital as capital, raw material or tools.

“The problem to be solved was how to perfect an organization covering so many outlying points, where the work was actually being done, in such a way that the management in New York would feel that the organization would, automatically and under all changing conditions of men and times, give to the stockholders service equal to that which comes from the individual management of owners.

“Every one knows that in any business, great or small, the organization is the great vital thing to success. If a man has a corner grocery store and two or three clerks working for him, much of his success depends on their interest and zeal in the store.

“So long as the owner of the store is working right with them every hour of the day he can largely control things ; but when a business is scattered through a number of cities and aVast territory, in the hands of thousands of men, the personal direction and control of one man becomes impossible.

“If great corporations are to succeed, not for a day, but for all time, some method must be found to make each man, wherever his duties, responsibilities and work may be, feel that he is a necessary factor in the organization; that on his own efforts,

in his own sphere, depends a certain measure of the success of the corporation, and that he will be rewarded with advancement, with recognition and with compensation according to his success and the success of his corporation as a whole.

“We found that the thousands of men employed in the corporation were divided substantially into two classes : Those who worked with their brains, and those who worked with their brains and their hands.

“The responsibility for general net results rested largely with the former class; the responsibility for the practical, every-day handling of the machinery and the manual labor rested largely with the second class. But it had been found that while the responsibility of the first class of men was, of course, very great, the opportunities of the second class might be of almost equal importance, because, in the practical, every-day working of the thousands of little and big machines and in the general handling of material, the man who is actually doing it, if his mind is centred on his work, can, with surprising frequency, suggest this, that, and the other improvement which reduces cost and increases output.

“The problem, therefore, was how to arrive at some method of compensating the officers of the subsidiary companies for successful management, and, at the same time, the actual operators in the plants.

“It finally seemed as though the basis must be one by which the organization of the subsidiary companies in the Steel Corporation would, on a substantial and permanent basis, and according to their places in the organization, share with the stockholders any success that might be arrived at from year to year.”

Mr. Perkins stood up and paced the floor, his brows knitted and a forefinger on his lip, an odd habit when he is thinking hard.

“You see,” he continued, “the finance committee, or, rather, the board of directors, stands like a judge between the stock-owning public, which is the proprietor, and the two hundred

thousand employes. It has no motive for being unfair to either. That is not the case with individual proprietorships.

“It was found that it took about eighty million dollars to pay the interest on bonds, the dividend on the preferred stock, and some dividend on the common stock, and set aside a fund for replacements and improvements. After this had been done, it would be to the advantage of the stockholders to have the organization step in at that point and share the profits, over and above that sum, with the stockholders.

“It was believed that this would be for the distinct pecuniary advantage of the stockholders and for the distinct benefit of the organization if it could be done on some basis that really would prove an incentive to the organization. As a result two offers were made:

“One offer gave an opportunity to purchase preferred stock, which was extended to the entire organization, from the officers of the Steel Corporation itself down through the officers of the subsidiary companies to the laboring men, clerks and office boys everywhere ; but this was done by classification, using salaries as a standard in such a way that the laboring men with the smaller salaries were given the first opportunity to purchase, and the basis of purchasing stock was made exceedingly attractive to them.

“For instance, a man having a salary of $800 per year or less was sure that in any offer of stock the corporation made he could get the amount he subscribed for, whether or not the manager of his department, the vice-president or the president of his company got any.

“The stock was offered to him at $2 to $3 less than the then market value. He was told that he could pay for it in monthly instalments ; that he could have as long a time as he wanted, up to three years, in which to pay for it ; that he would be charged five per cent, interest on his deferred payments and, at the same time, be credited with seven per cent.

dividends on the par value of the stock he was buying.

“He was told that if he would go into this matter seriously, with the idea of not only becoming a partner through stock ownership, but determining in his own mind that he was going to remain with the corporation, that he was not going to be a transient employe, that he was going to take up the work as his life work, so far as he could see, and that if he would keep his stock as he was paying for it and not sell it out, he would receive a credit, to use in helping him to pay for his stock, of $5 a year per share for five years. This is where he shared in the profits.

“The first stock offer was made at $82.50 a share. If a man subscribed for a share of stock and kept gradually paying for it and held it continuously for five years, these $5 a year payments would, in themselves, mark the stock down, until at the end of five years it would only have cost him $57-50.

“In addition to this he would receive a credit of a considerable sum in the difference between the five per cent, interest charged him on his deferred payments and the seven per cent, dividend paid on the stock.

“It was further agreed that these $5 payments made yearly for five years, would be paid whether or not the subscriber continued to pay for and finally took up his stock, and that such payments as were thus left in the fund by men who failed to continue to pay for their stock, would be divided at the end of five years among those who persisted in their payments and remained in the corporation’s employ continuously for five years.

“It was thought that there would be a certain amount of what might be called speculation and fascination in this unknown factor that would interest a great many men. It was only fair to increase in this way the reward of the men who, through thick and thin, good times and bad, in periods of depression and discouragement, stuck by this company ; for, after all, it is to this kind of manhood

that the company must look for its protection in times of sore need.

“While at first glance this may seem to be a complicated offer, at second glance it will be seen to appeal to a good many sides of a man. In the first place, it gave him an investment that would pay him a handsome interest on his money. Thousands of these men have no way of investing their funds.

“Whatever might come to the Steel Corporation because of fluctuating conditions, the $5 per share per year, credited as above described, would do several things :

“First: It would be a great incentive to the man to go into the purchase of the stock because it would mark it down so cheap.

“Second : It would be a great inducement to him to stay with the Steel Corporation through thick and thin, for at least five years.

“Third : It would be an assurance that in times of depression his share of stock, for which he started out to pay $82.50, could hardly fall below $57.50, to which in the course of five years it would be marked down by these $5 a year payments.

“Besides, the corporation guaranteed that the selling price of the stock would, at the end of the five years, be at least equal to the price at which he bought it.

“Fourth : The $5 a year payment was another way of sharing profits with the working man, with whom to share profits on the basis of any percentage of yearly earnings was found to be very difficult, and so this $5 per year payment to him, out of the earnings of the Steel Corporation, was a guarantee that he should share in whatever profits were made, whether they were large or small, he only having to show that he was a permanent stockholder and permanently in the company’s employ—it being the opinion of the finance committee that the average man who settles himself down to becoming a stockholder and remaining permanently in the company’s employ, must be a faithful employe, with ability and energy

enough to be retained, in season and out, by the management.

“The question then arose as to how to prevent a man from selling his stock to an outside party, or taking more than he himself could pay for and having some one help him carry it. It will be noticed that the man is required to keep the certificate in his own name continually; to produce it yearly to the treasurer of his company, with a letter from his superior officer showing continuous service to the company for the preceding year. He cannot borrow on it.

“It will be noticed that he is only allowed to pay for it in monthly instalments, to be deducted from the salary or wages he receives; that he can do this in such monthly amounts as he may wish, but not to exceed twenty-five per cent, of any one month’s salary or wages.

“It was thought that this would prevent a man from subscribing for more stock than he could naturally pay for, he having been put up to do it by some outside party who would help to carry it for him.

“These conditions were in no way onerous for the man himself and, happily, they have practically eliminated any speculation with any outside parties, and have had all the eT feet, and even more, than was expected, in holding the best men in the employ of the company steadily.”

Under the plan described by Mr. Perkins for the first time, 17,000 of the Steel Corporation’s 75,000 stockholders are its own employes, A new offer of preferred stock is made each year.

In the first year, 1903, 27,379 employes subscribed for 48,983 shares. Of these 12,694 dropped out in that year, 5,091 in the second year and 86 in the third. Those whose stock was cancelled lost their right to the $5 a year added by the company and to the difference between the five per cent, interest charged and the seven per cent, dividend paid by the corporation.

The extraordinary result is that those who took stock in the first year already have more than $70 a share

to their credit, having got everything lost by others, and will get their stock at the end of the five years for almost nothing.

In 1904 exactly 10,261 employes subscribed for 32,585 shares of stock. Of these, 2,344 dropped out in the same year, 474 in the second year, and 27 in the third year.

“Now,” said Mr. Perkins, “the other branch of the profit-sharing plan was aimed to interest and properly remunerate the officers and managing men, those who by their brains and ability made possible the broad success of the company.

“When the various subsidiary companies came together it was found that the officers of these companies who, almost without exception, were exceedingly able and enthusiastic men, and were devoted to their own particular company, in many cases had been fighting one another for years in the great business world of steel and iron. In some cases thev were hardly on speaking terms, so bitterly had they fought.

“Competition to a considerable extent was, therefore, about to be eliminated. A steel company in City A, which had fought a steel company in City B, was expected to co-operate with B. If the officers of the company A could, in any way, help company B, they were expected to do it.

“But they were a long way from the headquarters of the Steel Corporation in New York. How could this successfully be brought about—not for to-day, but for the future? The officers of the companies, who then were big, broad-gauged, able men, might do it ; but what about their successors of the years to come?

“Something must be done that would, automatically, so to speak, work this out; that would provide a condition where the officer of company A would be just as glad to see the officer of company B succeed as to meet with success himself ; that if he hit on a good idea, in place of keeping it quietly to himself, he would pass it along the line to all others.

“To put out a profit-sharing plan

that would reward the men of each particular company for the success of their company would have worked to make the men in each company labor for that company to the exclusion of co-operation with the other companies ; yet strict attention to each subsidiary company’s business was certainly most desirable.

“Finally an offer was made to all men of executive position, so to speak.

“They were told that after the Steel Corporation, as a whole, had earned the eighty million dollars I have already referred to, they would come in and share the profits of the entire corporation, on the basis outlined in the circular.

“They were told that these profits would be divided into part cash and part preferred stock, and that the preferred stock would be held for them, subject to their remaining in the company’s service a certain number of years.

“They were also allowed to subscribe for preferred stock on the same basis that the working men in their mills could subscribe for it, but they were not allowed to subscribe for any more than they could pay for out of twenty-five per cent, of their monthly salaries. This stock they could not get, provided the working men had first subscribed for all of it. In this connection, the fact that the president of a subsidiary company and the laborer in his mill were both subscribing for the same sort of stock on substantially the same basis, it was thought, would weld the entire organization more or less together.

“The sharing through cash at the end of each year, in the cash profits of the Steel Corporation, after eighty million dollars had been earned, put the officers of the subsidiary companies and the officers of the Steel Corporation on the broad plane of considering everybody’s success, and it was believed that after this had work-

ed a year or two the officers of company A would be just as keen to see company B succeed as they had been previously to see that company B failed and they succeeded.

“The finance committee allots each officer’s or manager’s share of the profits according to what he has done, in its judgment, to advance the interests of the Steel Corporation as a whole. No one is overlooked. No service is forgotten.”

Mr. Perkins pointed out figures showing the enormous increase in the Steel Corporation’s efficiency and success. He recalled the years of unbroken peace with its employes, whom it has made partners. He described the great $90,000,000 steel plant which the corporation’s success enables it to build at Gary, Indiana.

“This principle of co-operation has been adopted by other corporations,” he said. “I believe that co-operation, with proper supervision and regulation, will solve many problems that have puzzled us in this era of changing and confusing industrial methods.”

Another great corporation to which Mr. Perkins has applied the profitsharing plan is the International Harvester Company, which he organized. This powerful corporation has a capitalization of $120,000,000 and employs in all seventy thousand persons. The letters received in answer to this company’s first distribution of profits to its employes—letters full of gratitude, but more remarkable for pride, interest and loyalty expressed—furnish solid proof that the co-operative idea strikes its roots deep and draws strength from the best and most enduring elements of human nature.

“It is the sure, safe path of the future,” said Mr. Perkins. “Competition is no longer the life of trade. It must yield to the higher, broader principle of co-operation.”